So, NETFILE has recently opened and you are ready to get your tax information filed to the CRA. NETFILE, in case you did not know, if the Canada Revenue Agency’s (CRA) electronic tax-filing service which allows Canadians to send personal income tax returns to the CRA directly over the Internet, in a safe, secure manner.
Using NETFILE shortens the time it takes for the CRA to receive your tax return, to process your tax return, and to issue you a Notice of Assessment with either a balance owing or a refund. If you signed up for the CRA’s Direct Deposit, then that would even speed up the refund process, but it also gives the CRA your banking information which could be a problem if you have a balance owing and don’t pay it.
Let’s just focus on the positive, right now, and look at eligibility. While most Canadian taxpayers can use NETFILE, some however, cannot.
If you are filing your first ever income tax return to the CRA, and they do not have your date of birth on file, then you cannot use NETFILE.
Non-residents of Canada, deemed residents (who don’t have to pay provincial or territorial tax), emigrants and tax filers with permanent addresses outside of Canada also can not use NETFILE.
Additionally, Canadians who have filed for bankruptcy in the previous two tax years, or who have income from a business outside their province or territory of residence or have a Social Insurance number beginning with the numbers 09, cannot use NETFILE either.
The CRA does not have the ability to accept tax returns for tax years prior to 2014 over NETFILE, and they will not accept tax returns prepared on someone else’s behalf over NETFILE. This impacts executors who prepare final tax returns for deceased persons, and authorized representatives, who will be preparing your return for you – which will have to be submitted through e-file instead.
There are also certain types of income which the CRA does not presently accept on tax returns filed through NETFILE, and they are not significant. This includes Canadian-source income from Lloyd’s of London and employment income from international organizations. Additionally, you cannot use the system either if you are reporting lump-sum pension income accrued to Dec. 31, 1971 or qualifying retroactive lump-sum payments.
You cannot file using NETFILE if you are claiming mining reclamation trust tax credits, federal business or non-business foreign tax credits for more than three countries, or deductions for scientific research and experimental development expenses.
Additional credits that prohibit you from using the system include Alberta stock savings plan tax credits, Saskatchewan royalty tax rebates, Nova Scotia research and development tax credit recaptures, and Newfoundland and Labrador research and development tax credits.
If you are claiming a deduction on line 207 with amounts for foreign retirement contributions, you also cannot use the system.
If you claim more than 10 dependents on line 318 or if you claim more than 22 children on your return, you cannot use NETFILE.
Restrictions on Farmers
If you are part of the AgriStability or AgriInvest programs, you cannot use NETFILE if your partnership is required to file an information return, if a corporation is one of your partners, or if you are a Canadian Indian reporting tax-exempt self-employment income.
Additionally, if you are have more than eight occurrences of selected type-nine financial data reported in sections 10 through 12 or more than 10 occurrences in sections 7 and 8 on form T1273, you cannot use the system.
Issues With the Disability Tax Credit
If the CRA has not approved your request for a disability tax credit and you want to claim the disability amount, you cannot use NETFILE. In particular, the CRA cautions people who have submitted an application for the DTC but have not been certified to not report registered disability savings plan income in field 125.
Ready, Set, File
Now that you know the ins and out of what you can and can not file on NETFILE, make sure that you have all of your t-slips, use the Auto-fill my return feature, and then enjoy all the free time you will have after you have filed.